The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian contractors and other Baha Mar creditors yesterday hailed Prime Minister Perry Christie and his government for “not blinking” in negotiations with China for payment of multi-million dollar sums owed to them.

The praise came as Mr Christie last night unveiled a Supreme Court-approved agreement between the Government and Baha Mar’s secured creditor, China Export-Import Bank, for the $3.5 billion project’s construction restart and completion.

Although specific details were minimal, the Prime Minister said the China Export-Import Bank had agreed to finance Baha Mar’s construction completion, with work set to restart in September 2016 after remobilisation that is set to begin imminently.

China Construction America (CCA), which was heavily criticised by original Baha Mar developer, Sarkis Izmirlian, for alleged “shoddy workmanship” that ultimately resulted in the project’s Chapter 11 bankruptcy protection filing, will return to finish construction.

Mr Christie gave no dollar figure for how much it will take to complete Baha Mar’s physical construction, but his announcement indicated that it was critical for the Government that all Bahamian creditors receive what was due to them.

The Prime Minister said this meant CCA would “resolve outstanding claims with sub-contractors and suppliers”, while “funds will be made available” for Bahamian contractors and other local creditors “to recover a significant portion, and possibly all”, of the monies owed to them.

Again, details and figures were not released, and it is unclear who will be responsible for compensating the latter category - the China Export-Import Bank, CCA or a combination of the two.

The Prime Minister promised that more details on the Government’s agreement with the China Export-Import Bank will be released shortly, as he acknowledged that much paperwork relating to the deal still had to be completed.

At the moment, though, Bahamian contractors and other suppliers (who are non-CCA creditors) could still recover anywhere from 5 per cent to 100 per cent of the sums owed.

Mr Christie said “many of the people and companies” previously hired to work on Baha Mar as sub-contractors would be re-engaged to complete the project, while the Government and its corporations, such as Bahamas Power & Light (BPL), will “recover some of their outstanding claims against the Baha Mar companies”.

Significantly, the agreement also includes compensating Baha Mar’s former employees, including the 2,000 staff made redundant last November.

Mr Christie said they would receive outstanding salaries, severance and accrued vacation pay, while sums deducted from their salaries and pension contributions will be repaid.

Bahamian companies holding the retail and restaurant concessions at Baha Mar will retain them via the agreement with the China Export-Import Bank, with the Government having agreed to “extend appropriate concessions to finish construction”.

The nature, and amount, of these investment incentives has also yet to be disclosed, with the issue generating controversy several months ago amid claims that the Chinese had requested 500 ‘economic citizenships’ and a 30-year Value-Added Tax (VAT) break.

Mr Christie, though, described the agreement as “a win-win” for the Bahamian people.

However, the promised payments to Bahamian contractors and other creditors could provide a major, and much-needed, multi-million dollar boost for both those companies and the wider economy if they come through.

The construction industry is said to be owed $74 million collectively alone, and recovery of all - or even part - of such an amount could represent the difference between some firms and individual tradesmen surviving or failing, and workers retaining their jobs. Economic growth may also receive a positive jolt.

The Government ensured numerous contractors and private sector executives were present at yesterday’s press conference to hail the announcement, and there appeared to be genuine relief that the end to more than a year of agony was in sight.

Peter Whitehead, principal of Osprey Development, whose joint venture with Yates is owed some $5.3 million for work completed on Baha Mar, said: “I don’t think we realise what a monumental day this is...”

Turning to the Prime Minister, he added: “Negotiating this contract which you have negotiated is almost impossible to negotiate, but it is done.

“There’s always this saying: ‘When you cross the table, the person who blinks first is screwed’. In this case, you didn’t blink, and we’re so grateful.”

Inga Bowleg, John Bull’s director of business development, speaking for Baha Mar’s retail concession holders, added: “Indeed, a prayer answered. For Bahamians, it’s a wonderful, wonderful day. You [Prime Minister] looked out for Bahamians every step of the way.”

Ms Bowleg said John Bull, and others, had invested “millions and millions of dollars” in fitting out their Baha Mar stores and hiring employees, only for the project to come to a halt.

She added that John Bull had managed to redeploy hundreds of staff to its other locations and retain them, as Mr Christie urged the company - and all others - to “trust him”.

Acknowledging to the Prime Minister that “there were many times we started to doubt you, but you came through for the Bahamas”, Ms Bowleg reiterated: “This is a wonderful day. I think this is the beginning of great things to come in our economy, and we need that.”

Larry Treco, president of CGT Construction, said “a staggering amount of monies have been taken out of the economy” by the Baha Mar impasse.

“The Prime Minister said he would try his best so that we were not thrown under the bus,” Mr Treco said of Mr Christie’s pledge to the construction industry.

“I’m an optimistic person, but over the past year-and-a-half my optimism was challenged greatly. The outlook was not very good.”

Mr Treco praised the agreement as “a tremendous occasion”, and expressed optimism that the Bahamian economy will now prosper.

Baha Mar’s construction completion, which has been estimated as costing around $600 million, is one step in resolving the project’s future.

No mention was made last night of a preferred bidder having been selected to acquire the $3.5 billion project, which indicates that the Deloitte & Touche receivers are continuing their buyer search and selection process.

K P Turnquest, the Opposition’s deputy leader, told Tribune Business that as a result the agreement announced by the Prime Minister was “half a bucket” or a ‘glass half full’.

He pointed out that Baha Mar remained in receivership and provisional liquidation, and questioned how the China Export-Import Bank’s additional outlay - taking its exposure to possibly more than $3 billion - would impact any sales process or purchase price.

While acknowledging that a completed Baha Mar would be easier for China Export-Import Bank to sell, Mr Turnquest questioned whether its seeming desire to be ‘made whole’ would place the development out of reach of any buyer - given that the construction and ‘Bahamian compensation’ outlays would likely be added to the purchase price.

The FNM deputy leader, though, said it was “wonderful news” that Bahamian creditors would be paid.

Mr Christie said yesterday that one of his Government’s key objectives had been for Baha Mar’s casino and convention centre, and two associated hotels, to be open in time for the 2016-2017 winter season.

However, no construction completion deadline was given, and it appears that the earliest Baha Mar could be open - under new ownership - will be winter 2017-2018.

The Prime Minister said he and the China Export-Import Bank had also agreed that the new owner should be a “world class casino and hotel operator”.